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Biggs: The state of the debate on Social Security today is dire. I’ll say that. Just to wind back to where you started it, it is surprising in a way, that Social Security isn’t always in the news. It’s the biggest federal spending program, bigger than Medicare or the military. The Social Security payroll tax, that 12.4 percent, is the biggest tax that most people actually pay—bigger than the income tax. Social Security benefits are the biggest source of income for most retirees. And we’ve literally known for 40 years that Social Security needed to be reformed. It was 40 years ago when we did the 1983 Social Security reforms, and almost immediately after that these long-term deficits started creeping back in. We’ve known since about 1990 that the trust fund would run out somewhere in the mid-2030s.

This is a slow moving demographic problem; but the real issue is that as slow moving as the demographic problem may be, Congress is even slower moving. We have gone 40 years without fixing a problem that’s entirely predictable. The last big push on Social Security reform was the George W. Bush administration. I worked there, and they didn’t get anything done, but Bush was pushing very hard on it. Both sides were very well informed. They understood the issues. They understood the program. Today, Social Security as a policy debate has been dormant for quite some time. Your average member of Congress would struggle to describe how the federal government’s largest program works. They have some points on 3×5 cards, but the subtleties of how the program works, the choices we face, and the costs and benefits of each are largely lost on policymakers today. At the political level of candidates running for president, it’s actually even worse. This is the point where I’m starting to get worried about whether we end up having a hard landing or a soft landing on this issue.

The Puerto Rico Status Act, at its core, hopes to resolve a century-long contractual relationship imposed on Puerto Rico after the U.S. triumph in the Spanish-American War in the late 19th century, which has shaped every aspect of its upbringing among its Latin American neighbors.

It’s governed by a series of political tools the U.S. government created to keep tabs on its newly acquired territory — like the Jones Act (1920), which controls maritime commerce and embargo with other countries, and the Foraker Act (1900), which defines the kind of self-governing body Puerto Rico was allowed to install.

Today, the Department of Justice will file a brief in the Supreme Court in the case United States v. Vaello-Madero, which addresses whether a provision in the Social Security Act that declines to provide Puerto Rico residents with Supplemental Security Income (SSI) violates the Constitution’s equal protection principle.

This provision is inconsistent with my Administration’s policies and values. However, the Department of Justice has a longstanding practice of defending the constitutionality of federal statutes, regardless of policy preferences. This practice is critical to the Department’s mission of preserving the rule of law. Consistent with this important practice, the Department is defending the constitutionality of the Social Security Act provision in this case.

In recent months, Republican leadership in Congress has expressed their desire to make cuts to popular safety net programs like Social Security and Medicare. Most notably, probable Speaker of the House Kevin McCarthy and Senate Minority Whip John Thune both openly laid out their plans to make cuts to Social Security benefits.

Social Security is a program put in place by President Franklin Roosevelt’s administration as part of several pieces of economic legislation passed to help Americans after the Great Depression. Its main function is acting as an earned retirement plan, where part of an employee’s paycheck is put into a fund while the employer matches up to a certain percentage. The fund can then be accessed after the individual retires. Social Security usually ends up being the main source of income for retired individuals, and millions of people in the United States would be in poverty without it. The program also offers disability and survivor benefits.

The Puerto Rico Status Act introduced last week in the House of Representatives is the latest in a long line of efforts to address the legislation’s namesake issue. It would allow Puerto Ricans to choose between statehood, independence, and free association; for the first time ever, that vote would exclude the status quo and bind Congress to the result. Therefore, it’s the most serious attempt in decades to decolonize the largest and longest-held U.S. possession.

It’s also a politically stillborn effort that has no chance of becoming law.

This is what's really behind Social Security's worrisome long-term outlook. Over the past eight-plus decades, we've watched Social Security grow into the most important social program in this country. Today, close to 65 million people receive a monthly payout from the program, with over 22 million of these folks pulled out of poverty thanks to their benefit. But the program is in big trouble. Every year since Social Security first began paying benefits (1940), the Social Security Board of Trustees has released a report that examines the short-term (10-year) and long-term (75-year) outlook for the program. Since 1985, the OASDI Trustees' report has cautioned that program outlays would exceed collected revenue over the long term. Put another way, Social Security has unfunded obligations over the next 75 years. To be a bit more specific, the latest Trustees report estimates that Social Security's $2.9 trillion in asset reserves (i.e., its net cash surpluses built up since inception) would run out by 2035. To be clear: Social Security isn't going bankrupt just yet. It has two recurring sources of revenue -- but if and when these asset reserves are depleted, an across-the-board benefit cut of up to 24% may await retired workers and survivor beneficiaries. In total, the 2020 Trustees report estimates that Social Security is facing $16.8 trillion in unfunded obligations between 2035 and 2094, which is $2.9 trillion higher than in the previous year. How exactly does the nation's top social program suddenly find itself on such poor financial footing? The answer lies with the following seven factors. 1. Baby boomers are retiring I'm not a fan of blaming baby boomers simply for being born, but their exodus from the labor force is weighing down the worker-to-beneficiary ratio. According to intermediate-cost model estimates from the Trustees report -- which represent what's most likely to happen -- the number of retired workers receiving benefits should surge from 45.1 million in 2019 to 64.6 million by 2035. Over that time, the worker-to-beneficiary ratio is expected to decline from 2.8-to-1 to 2.2-to-1. As a reminder, the payroll tax revenue collected from workers was responsible for $945 billion of the $1.06 trillion in revenue collected for Social Security in 2019. So, yes, the retirement of boomers is a big deal. 2. We're living longer than ever before Another bittersweet concern is that we're living longer. Between 1940 and 2020, the average life expectancy at birth for Americans jumped from north of 64 years to almost 79 years. On the one hand, living longer is fantastic. We get to spend more time with our friends and family, and do what we love. But it's not necessarily a great thing for the Social Security program. According to data from the Social Security Administration, the average 65-year-old will live about 20 more years. Social Security was never designed to pay benefits for multiple decades. Further, the full retirement age -- i.e., the age at which retired workers can collect 100% of their monthly benefit, as determined by their birth year -- will have only risen by two years through 2022. Meanwhile, life expectancies are up by more than 15 years since 1940. Put simply, longer average life spans are straining the Social Security program. 3. Income inequality is on the rise Social Security's woes can also be partly blamed on rising levels of income inequality. The aforementioned 12.4% payroll tax, which does the heavy lifting for Social Security, is applied to earned income (wages and salary, but not investment income) ranging between $0.01 and $137,700, as of 2020. Approximately 94% of working Americans will earn less than $137,700 this year, meaning they'll be paying into Social Security on every dollar they earn. Earned income above $137,700 is exempt. Between 1983 and 2016, the amount of earned income escaping Social Security's payroll tax roughly quadrupled from north of $300 billion to $1.2 trillion. Additionally, the well-to-do have little or no financial constraints when it comes to paying for preventative medical care or prescription medicines. The same can't be said for everyone else. As a result, the rich are living notably longer than everyone else and collecting bigger monthly benefits in the process -- further weighing down Social Security. 4. Net legal immigration levels have been halved Immigration is also a serious problem, albeit not for the reasons you might have read about. As a whole, immigration is a net positive for the Social Security program. Most legal migrants into the U.S. tend to be young, and are therefore going to spend decades in the labor force contributing via the payroll tax. The Trustees' intermediate-cost model assumes a net average of 1,261,000 legal migrants entering the U.S. every year over the long-term. However, net immigration rates into the U.S. have been sinking for the past two decades. In the most recent rolling five-year measurement from the World Bank, a net average of 954,806 legal migrants entered the U.S. annually between the second half of 2012 and the second half of 2017. Less legal (and undocumented) immigration will almost certainly weigh on the worker-to-beneficiary ratio. 5. Birth rates are at all-time lows Couples also bear part of the blame for Social Security's woes. The program counts on a steady or rising level of births each year to offset the number of older workers leaving the labor force. The intermediate-cost model had been running with an assumption of 2 births per woman for years, but lowered this figure to 1.95 births per woman in 2020. This is a big reason we saw unfunded obligations jump by $2.9 trillion from the previous year. In 2019, the U.S. birth rate hit an all-time low of 1.68 births per woman, which is actually below even the high-cost model estimate of 1.75 births per woman provided by the Trustees. Couples are waiting longer to get married and have children. They're having fewer unplanned pregnancies, and have been discouraged from having children by the poor state of the U.S. economy. Without a quick turnaround in birth rates, the worker-to-beneficiary ratio will be negatively impacted. 6. The Fed has crippled Social Security's interest-earning capacity Even the nation's central bank gets a wag of the finger. The Federal Reserve is tasked with controlling and influencing monetary policy. It primarily does this by increasing or decreasing the federal funds rate, which is the overnight lending rate that banks charge one another. Moving this rate higher or lower causes ripples that influence interest rates. With the U.S. economy currently in recession, and the Fed maintaining a predominantly dovish stance for much of the past decade, the federal funds rate is currently at a record-tying low range of 0% to 0.25%. This is great news for companies and individuals looking to borrow, but awful for anyone looking to generate interest income. Social Security's $2.9 trillion in asset reserves are required by law to be invested in special-issue bonds and, to a lesser extent, certificates of indebtedness. The yields on newly issued bonds have been plummeting, with some yielding a meager 0.75%. In other words, the Fed's dovish monetary policy means less in the way of interest-earning capacity for Social Security.

It's no wonder the majority of millennials say they aren't factoring Social Security benefits into their retirement planning, for years they've been hearing that the retirement and disability program is going bust. Their belief is based on projections such as from the most recent Social Security Trustees Report showing that Social Security's trust fund reserves will be depleted in 2033. That's one year sooner than the program's trustees had projected last year, and is partly due to shifts such as slowing economic growth. Yet experts say that some Americans, especially younger workers, have misunderstandings about the impact if the trust fund indeed goes bust — a prediction, by the way, that's by no means a certainty. Even if the trust fund becomes depleted, the Social Security Administration will continue to take in payroll taxes from workers and their employers, allowing the program to pay the majority of benefits, experts note. The problem, though, is that if the trust fund runs out of money, the program's 67 million beneficiaries will experience a benefits cut. And experts say those cuts could prove devastating to millions of older Americans, disabled people and children who receive benefits. What would happen if Social Security ran out? The impact of the trust fund's projected depletion was highlighted by Social Security Administration's Chief Actuary Steve Goss and Deputy Chief Actuary Karen Glenn on a recent webcast hosted by the American Academy of Actuaries. "At that time [if the trust fund is depleted], there will be an immediate drop in benefits of about 25%," Glenn said. The system is designed to be progressive, meaning that the Social Security benefits paid to low-wage earners represent a bigger share of their earnings. For that reason, it could hit low-income Americans hardest. Currently, retirees who were low earners while working — defined as earning about $30,000 a year while employed — get about 50% of their income replaced from their Social Security benefits, Glenn noted. But that would drop to about 40% of replacement earnings in 2033 if the trust fund runs out of money. High earners, or people who paid Social Security taxes at the earnings cap, about $160,000 a year, would see their replacement rate drop from 25% now to 20% in 2033, she said. "The question is: Do you consider these benefits adequate?" Glenn remarked. Deep cut for low earners The cut would prove more significant for low earners, an issue given that low-paid workers are less likely to set aside retirement funds or save up for old age than higher-income Americans. They're also likely to be more dependent on Social Security for that reason. The result would likely lead to a spike in poverty rates for older Americans, predicted Nancy Altman, the president of Social Security Works, an advocacy group for the benefits program. "Not only would it increase poverty, it would deepen poverty for those already in poverty," she noted. She added, "You would really have to curtail your expenses. You might have to move; you might not be able to afford rent, and have to move in with someone who can take you in, like your adult children." What are the chances that the Social Security fund will run out? At the current trajectory, it appears very likely that the Social Security trust fund could run out of money in or around 2033. But that doesn't mean it will. Lawmakers could make a number of changes that would shore up the trust fund and put it in financial health for 75 years, according to Goss and Glenn. There are a number of proposals, from Democrats, Republicans and bipartisan committees, that tackle the trust fund's looming crisis. For instance, Republicans have proposed pushing up the retirement age to 70, effectively cutting between 2 to 3 years of benefits for today's workers — an idea that's not palatable to most Americans, with three-quarters telling an AP-NORC poll they oppose it. Are there other ways to fix Social Security? Other proposals include raising the wage cap on taxes, set at about $160,000 this year. Currently, any income above that amount is exempt from the payroll tax. That means that middle- and lower-income workers shoulder a much bigger tax burden in funding Social Security than the 6% who earn above that amount. Raising the income cap could go a long way toward shoring up the trust fund, experts say. Another option is to raise the payroll tax rate slightly, which could also cover some of the solvency issues. Senator Bernie Sanders, an independent from Vermont, in February introduced a bill to address Social Security's looming insolvency. His plan would add $2,400 in benefits each year for retirees, while applying the payroll tax to earnings over $250,000, among other changes. "The changes would have led to 75-year solvency," Glenn said, citing the Social Security Administration's analysis of Sanders' plan. What does the Social Security Administration say? The program has been shored up by lawmakers in earlier eras, which gives the Social Security Administration confidence that the program could be fixed before the 2033 depletion date, Goss said. "We are very confident that, as has happened in the past, that Congress and the executive branch will step up and make necessary changes so we won't confront that," Goss said. But, he said, he's hoping the changes occur sooner rather than later. Making changes earlier "provides more options," he noted. Altman of Social Security Works noted that the crisis facing Social Security has been a talking point for far longer than millennials might realize. She's hopeful that the issues will be fixed, as they have in prior decades. "I started working on Social Security in the mid 1970s — I was young and starting my career and I was told I would never get Social Security," she noted. "I was told I was the victim and it was these greedy geezers who wouldn't let benefits be cut." She added, "Now, I'm 73 years old and I receive Social Security."

American colonialism has had a considerable influence on economic inequality in Puerto Rico. The structural imbalances caused by a colonial economy that was focused on the profit maximization of transnational corporations created a permanent unemployment crisis in Puerto Rico. The incapacity to create enough jobs due to following an FDI-led economic model has contributed to fluctuating inequality levels. In every decade since Operation Bootstrap, unemployment has been one of the most critical issues in the local economy. Although some sectors of Puerto Rican society have substantially benefited from the postwar colonial economy, the working class’s living conditions have been declining for decades. Yet, US federal transfers to Puerto Rico have helped to keep the poverty level in Puerto Rico above regional averages. The US policy of incorporating sectors of the population into the colonial project by providing some material benefits, which began with the end of Spanish colonialism, became part of the colonial governance dynamics in Puerto Rico. The main legacies of American colonialism are an economy of increasing yields from FDI, chronic unemployment, decreasing wages, and increasing social transfers. All these factors have impacted Puerto Rico’s inequality dynamics. It is likely that the debt crisis will worsen inequality. The Fiscal Control Board’s austerity adjustment will be a crucial determinant of inequality dynamics in the following years. Therefore, even though the postwar economic model is virtually over, the colonial relationship with the United States is still a determining factor in Puerto Rico’s inequality dynamics.

“To them [the United States government], we are Black, an inferior race. Even if we are white or blond, we are inferior.” This assertion—which suggests that whiteness in Puerto Rico is always qualified in relation to the empire— was voiced by one of the more than one thousand Puerto Ricans who responded to a 2016 survey that asked them to state their racial identity. The survey was originally designed to recruit participants for a qualitative study led by Yarimar Bonilla on the political impact of the Puerto Rican debt crisis. Race was not the focus of the study, but in the final demographic section of the survey, Bonilla (in collaboration with Godreau) decided to experiment with posing the question of racial identity in an open-ended format rather than asking participants to select from a predetermined set of racial categories. This decision was partly based on previous critiques about the inappropriate imposition of US federal racial categories onto the Puerto Rican con- text (Berkowitz 2001). For example, in the US Census of 2000, 81 percent of Puerto Rican residents identified as racially “white.” According to critics, such misleading results evidenced, among other things, the incompatibility between US racial categories and local notions of racial mixture and whiteness (Duany 2005; Godreau, Lloréns, and Vargas-Ramos 2010; Lloréns, García-Quijano, and Godreau 2017; Vargas-Ramos 2005). Responding to this criticism, the research team used an open-ended question format, prompting respondents for their racial identity. We presumed that this would lead respondents to use culturally specific racial categories, yielding a more nuanced and complex portrait of racial identification.

After analyzing all responses to our open-ended ques- tion, we noticed a sharp decrease in the number of partici- pants who identified as white: 20 percent chose this option, as opposed to 81 percent on the 2000 US Census. As for local categories of racial mixture, such as trigueño, jabao, col- orao, or indio (see Appendix for definitions), only 10 percent of respondents employed them, even though the use of such color terms has been well documented in everyday conver- sations in which people draw distinctions based on pheno- type (Duany 2005; Godreau 2008; Gravlee 2005). Instead of using local racial terms to distinguish themselves from other Puerto Ricans, the overwhelming majority of respon- dents (69 percent) gravitated toward US federal categories of race and ethnicity, such as white, Black, Latino/Hispanic, or Puerto Rican.

The role of law—and the rule of law—are key features of the accumulation structures and histories we etched above. As Michel Foucault observed, “[i]n Western societies since the Middle Ages, the exercise of power has always been formulated in terms of law.” 58 In continuing to help contextualize Crenshaw’s opening query—“why law?”—we trace in this section how the historical use and misuse of law within the nation-state system emerge as the substantive and structural glue for the status quo that we examine here. For centuries, during the consolidation of the nation-state world system, human “progress” was the express project of national law. 59 The path toward progress, toward civilization, toward modern, rational, enlightened, and just problem solving, lay in the making of new, more, and better law: law by custom, law by codification, law by regulation, law by adjudication, law by reformation and restatement. Over time, law has become ever-more entangled with every other major social institution— with magic before it became religion, with religion before it became culture, with culture before it became nation, with nation before it became market. Law thus became central to the consolidation of personal identities, social groups and larger communities into the modern nation- state, even as it is now central to the consolidation of nation-states into an increasingly globalized international socio-legal system, formally based on liberal democratic values, such as liberty, property, equality, dignity, and self-determination. Law, in short, consistently has been at the core of modernity’s constitution. But this historical process also exploited within and across the emergent nation-states the weaknesses of the human being. 60 Laws repeatedly were crafted to prevent the individual human from fulfilling primal needs without paying a stiff price. So law was constructed to facilitate exploitation of the poor by the rich—of the less able by the more—as an integral element of the formation of nation-states, and even as the emergent ruling elites proclaimed commitments to diametrically opposite values, again like democracy, equality, and autonomy. 61 Similarly, law was constructed to facilitate the exploitation of the non- white by the white, and of the woman by the man, etc. Overtly, law was a liberal and democratic force but covertly it was designed to produce and perpetuate particular systems of stratification and subordination. This was “civilization.” Today, we call it global neoliberalism. From this perspective, we might describe the twentieth century as the time during which humanity perfected its tools and techniques of oppression within the nation-state, and emplaced the conditions for the development of new tools and techniques suited to the imperatives of corporate globalization. During the twentieth century, crude tools like formal (neo)enslavement and explicit exclusion began to give way to the more sophisticated techniques that today travel under the banners of colorblindness (in legal discourses) and post-racialism (in popular discourses). 62 Of course, the crudeness of those rudimentary tools lay in their bare and naked contradiction of the very essence claimed by the identity-obsessed elites of this nation-state for its unique national character: a democracy dedicated in fact to equal justice under law. Their crudity lay in their undisguised, unadulterated hypocrisy but, as such, they also testify to the power of ruling elites over this nation-state in cultural and material terms during those formative decades. It was this type of contradiction—a fundamental and gigantic contradiction—that enabled raced and gendered elites of past centuries simultaneously to proclaim and enact laws purporting noble purposes with systems and structures of outright subjugation and exploitation. This sort of gigantic contradiction—or hypocrisy—accounts for much of the grief and conflict in the histories that follow. This foundational and operational contradiction in the institutionalization of national law gave rise in the past few centuries to the idealized yet simultaneously corrupted form of the modern liberal democracy—corrupted by and because of the systemic, structural dissonance generated constantly by this kind of contradiction (and the imperative of maintaining their force materially and culturally in society). In the case of legal consciousness and Critical Race Theory, one relevant example is the dissonance of a society based explicitly, vociferously and simultaneously on slavery and “liberty” as expressed and enforced by formal law at the most sacred constitutional planes. 63 Today this gigantic contradiction means that law oftentimes is used mainly if not merely to launder politics. It is used to launder the dirtiest kinds of self-interested factional politics, often repackaged as identiarian politics, which in turn produce yet more “law”—in its many forms— oftentimes mainly to sustain traditional patterns of stratification and inter- group subordination. 64 As a result, law (as we know it) too often is rendered the servant of the “traditional” politics of neocolonialism and subordination rather than the agent of human values and rights formally endorsed by “modern” liberal democracies in their founding charters and related monuments. And, ditto, now, at the international level. Perversely, then, law becomes the tool for implementing expressly repudiated values—like structural, law-based, identity-oriented inequality—and for deflecting formally endorsed social goals, like equal opportunity for all. Through the centuries, this gigantic contradiction has spurred historical and continuing justice claims seeking to harmonize law’s material or cultural effects with society’s overtly professed values.

In September of 2017, two back to back hurricanes hit the US territory of Puerto Rico causing unprecedented damage, leaving residents without electricity for nearly a year, deepening an already existing fiscal crisis, and bringing about massive social change that many are still struggling to understand. Since Hurricane Maria, I have been trying to think and write about how this storm ripped the veil off Puerto Rico's colonial status, as much for those observing from afar who had perhaps never stopped to contemplate Puerto Rico's relationship to the United States, as well as for local residents who were forced into an affective reckoning with the kinds of structural violence they had been enduring for decades.

In this project, I seek to examine how climate change, the shifts brought about by the epoch of the Anthropocene, and the governmentality of debt with its neoliberal calls for austerity and resilience, are all shaped by what some describe as the coloniality of power.1 Indeed, I ask whether colonialism itself might not be best understood as a kind of disaster or, as Nelson Maldonado Torres (2016) suggests, a veritable catastrophe.

“Equality is a mirage where Congress can delegate significant authority to a territorial government to resemble the autonomy of the states,” writes Lopez-Morales, “while retaining the power to revise or revoke that delegation pursuant to the Territory Clause.”

Overruling the Insular Cases

The archipelago of Puerto Rico is the oldest continuous colony in the world.

Ever since Columbus set foot on what’s believed to have been the northwest coastline of Borikén in November 1493, Puerto Rico has belonged to some colonial power. The Spanish called the archipelago “la llave de las Antillas,” the key to the Antilles, because of its geostrategic location. Spain set up “Fort” Puerto Rico as their first line of defense to protect their vast American dominions and fend off European competitors with the construction of two massive forts at Castillo San Felipe del Morro and Castillo San Cristobal. They also used the island as a commercial pit stop for galleons before crossing the Atlantic with their loot.

C. Economic Empowerment Zones The Territories and their advocates should seek to have Congress temporarily designate each of the Territories as a special economic empowerment zone for a period of ten years. This would create a slate of economic incentives across multiple federal agencies, ideally designed to respond to the unique strengths and weaknesses of each Territory, to help stimulate the economies of the Territories. Similar to the extended temporary waivers of the Jones Act and most-favored state appropriations, this temporary designation can bring significant near-term economic relief and stimulus for the Territories while the larger issues about political status and political power are being deliberated by various stakeholders. In general, economic empowerment zone designations and their accompanying programs are designed to encourage investment activity and business development in economically distressed communities through a combination of favorable tax laws, grants, subsidies, jobs programs, regulatory easing, and other economic incentives. In the past, Congress and various States have used such programs to help improve rural and urban communities. For instance, some of the most economically developed portions of present-day Baltimore, Maryland, and Harlem, New York, were due in part to economic empowerment zone programs. Some of these programs have had remarkable successes following implementation, while others have been less fruitful. That said, it is often difficult to establish a clear causal link between the empowerment zone programs and their economic effects, as is the case with many economic incentive programs. Historically, empowerment zone programs have had bipartisan political support, thus making them a more politically feasible idea. Both Democrats and Republicans have found some appeal in using government incentives and deregulation to stimulate market-oriented, localized community economic development. The most prominent federal and state empowerment zone programs found their origins in the 1980s under the Reagan administration and the 1990s under the Clinton administration. More recently, as part of the Tax Cuts and Jobs Act of 2017, areas of each of the Territories were designated as “qualified opportunity zones,” entitled to certain tax incentives and benefits intended to spur investments. As proposed herein, each of the Territories would be designated a special economic empowerment zone for a period of ten years. This designation would help attract investment and business activity to the Territories, each of which has had stagnant growth and higher unemployment rates compared to national figures over the last decade. Ideally, the designating legislation and accompanying programs would be designed with the input of key stakeholders from the Territories who are most knowledgeable about each Territory’s strengths and needs. If designed properly, economic empowerment zone programs coupled with smart local efforts would help foster near-term economic growth in the Territories, create local job opportunities, improve the daily lives of the people living there, and decrease each Territory’s reliance on uncertain funds from the federal government. For instance, in the aftermath of two catastrophic hurricanes in 2017, the government of Puerto Rico has made modest efforts to attract entrepreneurs and investors in businesses related to filmmaking, financial technology, and cannabis to the island. While the efficacy of these modest local efforts remains to be seen, additional incentives provided via a special federal economic empowerment zone designation could make the island more attractive to entrepreneurs from the American mainland and around the world in the near term. In addition to helping the Territories, these programs can create “new markets” for businesses, entrepreneurs, and investors from the mainland. Such programs for each of the Territories may be particularly appealing because they are nimble enough to aid each Territory according to their own specific strengths and needs; the programs are ultimately localized and market-oriented in their design, implementation, and effects to attract a wide and diverse population of investors with different investment preferences and outlooks. While businesses have become more socially conscious and more willing to engage with distressed communities to enhance social and business value, economic incentives nonetheless play a significant role in attracting large, long-term private investments in the first place. Understandably, the Territories may be reluctant to rely on federal, market-oriented incentive programs following the harrowing experience of Puerto Rico with the enactment and subsequent repeal of the section 936 tax incentive. While this type of skepticism and reticence is warranted, policymakers in both Washington and the Territories will have the benefit of learning from Puerto Rico’s previous experience (and hopefully will make better decisions to avoid similar pitfalls). However, even if similar mistakes are made with the economic empowerment zone programs, the near-term positive impact would likely outweigh the long-term uncertainties associated with such programs, especially since the Territories are all in need of some economic stimulus in the immediate and near future. None of the three new pathways proposed here will solve all or even most of the complex and diverse set of problems confronting the Territories, collectively or individually, including complex, deep-seated issues involving the indigenous people of the Territories. Furthermore, drafting, passing, implementing, and executing these three new proposals may prove difficult. Nevertheless, these proposals offer a pragmatic trio of politically feasible policies to bring about immediate benefits to the people of the Territories while progress is being made on the longstanding, larger political issues. These proposals can hopefully move the conversations and plans of action beyond the well-traveled, but unsuccessful, paths of the past towards a more promising direction of real, tangible progress for the Territories.

B. Most-Favored State Appropriations The Territories and their advocates should seek temporary most-favored state (MFS) status in appropriations related to Veterans Affairs (VA) and the Federal Emergency Management Agency (FEMA). This temporary MFS in VA and FEMA appropriations, lasting for a renewable period of five years, will help alleviate some of the harms that come from being politically powerless in Washington in the critical areas of veteran care and disaster relief. Funds for veteran care and disaster relief are particularly critical to the Territories. In terms of VA facilities, veterans residing in the Territories do not have the same kind of support as their peers on the mainland despite their high military participation rates and veteran populations. For instance, Guam was ranked last in VA per capita spending in 2012; it does not even have a meaningful in-patient veteran care facility despite having “one of the highest concentrations of military veterans among U.S. states and territories.” Similarly, American Samoa has the highest per capita military enlistment of any state or territory, but its treatment facilities for veterans do not reflect its people’s sacrifices. Veterans from American Samoa and Guam frequently have to travel thousands of miles to seek medical attention in Hawaii or the American mainland. Furthermore, without any meaningful political power in Washington to advocate for disaster relief assistance, the priorities of the Territories are often left to the whims of elected officials in Washington who care more about their voting constituents than the distant residents of the Territories. The geographic locations of the Territories make them particularly vulnerable to catastrophic hurricanes and typhoons, as evidenced by the destructive storms that ravaged Puerto Rico, US Virgin Islands, and the CNMI in 2017 and 2018. In the aftermath of the two apocalyptic storms in 2017 that devastated Puerto Rico, President Trump openly suggested withdrawing federal disaster relief funds while the island was just beginning its recovery, and Congress took over a year to provide additional disaster relief aid. A year later in 2018, while the island continued to struggle with its recovery, President Trump openly denied the rising death toll connected with Hurricane Maria that was approaching 3,000 casualties. In 2019, President Trump again openly disparaged the local leaders of Puerto Rico and suggested withholding further disaster relief funding. Such denials and suggestions about disaster relief appropriations were not made by the Trump administration or previous administrations for devastating storms that struck Florida, Louisiana, North Carolina, and Texas. The concept of MFS status is borrowed from the international trade law’s concept of the most-favored nation status. Under the seminal legal framework of the General Agreement on Tariffs and Trade of 1947 (GATT), the most-favored nation treatment principle means that “any advantage, favour, privilege or immunity granted by any contracting party . . . shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.” In practice, a nation-state that is conferred MFS status will generally receive trading terms co-equal to the nation-state receiving the most preferential treatment from the granting state, subject to certain limitations. As a member of GATT and its successor, the World Trade Organization (WTO), the United States has used the most-favored nation designation to normalize trade relationships with other nation-states. For example, the United States granted permanent most-favored nation status to China when it became a member of the WTO in 2001. As a result, the United States gave China some of the most preferential trading terms relative to other countries and permitted it to permanently bypass the previously contentious annual debates on its designation in Congress. The Territories should seek to receive renewable temporary most-favored state status in VA and FEMA appropriations on a pro-rata basis from the federal government. This means that the Territories would receive the same appropriations as the States receiving the highest appropriations of VA and FEMA funding for a period of five years, consistent with the Congressional Budget Act’s mandated timeline for federal budget resolutions. As a simple illustration, if California were to receive $5,000 per resident on VA and FEMA appropriations annually, and it represented the highest per capita appropriation level, then each of the Territories would receive that level of appropriation for its people. A narrow focus in these two critical areas of VA and FEMA appropriations may make the proposal more politically palatable. A blanket, across-the-board MFS status for all federal appropriations is likely a political nonstarter in Congress, and many appropriations to the States are inapplicable or unsuitable for the Territories. MFS status for the Territories would alleviate some of the harms that come from being politically powerless in the national government and unable to fully advocate for the veterans and Americans living in the Territories. Representatives and senators from each of the States frequently advocate for favorable provisions and appropriations for their constituents in a way that non-voting representatives from the Territories simply cannot do for their people. Elected officials from the Territories, due to their lack of political power in Washington, are often left to publicly plea for assistance through the media and hope that their pleas do not fall on deaf ears. MFS status for the Territories would help remedy this situation by allowing federal appropriations to better reflect the reality that the cost-of-living in the Territories is by many measures higher than in the mainland because of geography. Current appropriations for veteran care and disaster relief through the VA and FEMA, respectively, do not have cost-of-living adjustments despite the fact that a dollar in the continental United States frequently has more purchasing power than in the Territories. Put simply, disaster relief efforts are more expensive when goods have to travel thousands of miles across oceans. Likewise, veterans seeking care for complex procedures and treatments have higher travel costs relative to veterans living on the mainland because they must fly thousands of miles to the American mainland, while veterans on the mainland can frequently drive to an appropriately equipped hospital. In sum, a renewable five-year MFS status for the Territories in federal VA and FEMA appropriations represents a sensible and workable policy that can bring about some immediate relief to the people of the Territories. Moreover, the renewable feature of the proposal will hopefully create a natural, periodic opportunity for the plight of the Territories to receive some meaningful attention in Congress during budget deliberations.

Data examined in prior sections suggests key factors to gain a better understanding of the families’ experiences with the CTC and to improve access to the credit. 1. Income: Low-income families are less likely to file for the CTC and are more likely to face obstacles while filing for the credit. 2. Education Levels: Having a college degree is a buffer for potential problems in filing for the CTC and may help speed benefit disbursement, as people with degrees were less likely to receive identity verification letters. 3. ONG Engagement: Nonprofit organizations sought to decrease communities’ access barriers by delivering information on the CTC and providing filing assistance. ONGs went to places that are more isolated from bigger towns, where wireless internet signals are poor, to reach populations with limited technological proficiency. 4. Language: The lack of Spanish-speaking staff posed challenges for many families. Spanish-speaking families were forced to wait for hours to be assisted by the IRS. 5. Technology: People who were more tech savvy had better access to the CTC. Even if most applicants have cell phones and can make calls and surf the internet, the required technical knowledge to file online was out of reach for many, particularly seniors. In some areas, a stable internet connection, which was required to use online tools, was unavailable. 6. The IRS’s understanding of Puerto Rico: The IRS does not appear to have been ready for the large number of forms from Puerto Rico, and it does not appear to have undertaken adequate planning for better service deployment. Informational materials in Spanish were not appropriately adapted to the sociocultural context of Puerto Rico. 7. Geography: People who live in bigger towns and in the metropolitan area managed to secure greater access to and better information on the CTC. Most VITA Centers were located in malls and big municipalities. IRS service days took place in the metropolitan area. People from mountain regions also faced difficulties in terms of their internet connection while filing online. 8. Informational campaigns: People rely on traditional mass media—such as radio, television, and newspapers—and trustworthy advocates to gather information. Although they use social media, they are wary of its content, as they are aware of the disinformation that is disseminated there.

Against this backdrop, the Child Tax Credit (CTC), which was expanded by the American Rescue Plan Act (ARPA) in March 2021, came as a breath of fresh air and a unique opportunity to improve the economic conditions of hundreds of thousands of families with children in Puerto Rico.

In 2021, the CTC awarded $3,000 per child aged 6 to 17 and $3,600 per child aged five and under. It is estimated that 305,000 families in Puerto Rico could have been eligible for the CTC. Considering the high income limits and that no income from employment was required, the CTC practically applied universally to families with children across the archipelago of Puerto Rico.

Throughout that time, families in Puerto Rico were eligible for the Child Tax Credit (CTC), which helps nearly all families living in states, only to the extent that they had three or more children under 17. Puerto Rico has the lowest birth rate in the U.S., so this was a very small proportion of the residents of the Island. What’s more, many people were unaware of the credit. They were required to file a federal income tax return to receive the credit, and most Puerto Ricans are not required to file these returns.

Under the , Puerto Rico became eligible for the Child Tax Credit under the same terms as the states. This gives a credit of $3,000 for each child ages 6 to 17 and $3,600 for children under age 6.

Among other  (CTC), the American Rescue Plan (ARP) made the  CTC available to far more families in Puerto Rico. However, because so few parents on the island pay federal income tax, or even typically file a Form 1040, policymakers and community organizations will have to work hard to help families get this critical benefit.

The ARP permanently  that had prevented most Puerto Rican families from accessing the CTC: one required claimants to have at least three eligible children, and a second calculated a Puerto Rican filer’s CTC based on how much they paid in federal payroll tax.

Yesterday, the governor of Puerto Rico announced that his government’s $72 billion of debts are not payable, in advance of $1.92 billion in debt service payments due on Wednesday. This announcement follows over a year and a half of uncertainty about Puerto Rico’s ability to meet its financial obligations, including a downgrade of its government bonds to junk status and discussions about the possibility of a partial government shutdown.

As waves of shock from the announcement ripple through bond markets and the news media, it is worth reflecting on the role that taxes played in creating the current crisis. The treatment of Puerto Rico in the United States federal tax code helped create the island’s current fiscal situation, and the failure of Puerto Rico’s government to reform its tax code exacerbated matters further.